India rupee falls to 2-mth low, erases post-reform rally

Mon Nov 12, 2012 1:28pm IST

Related Topics

Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

* Rupee trading at 55.07/09 vs 54.75/76 close on Fri

* USD/INR breaks major 100-day moving average resistance

* Trade deficit widens to $21 bln in Oct

By Subhadip Sircar

MUMBAI, Nov 12 (Reuters) - The Indian rupee fell to its lowest in nearly two months after data showing the a record trade deficit and a contraction in factory output stoked fears about economic growth at a time of continued high inflation.

The rupee's fall to as low as 55.12 to the dollar has erased a rally sparked by the government's announcements of a slew of fiscal and economic reforms in mid-September that took the local currency to as high as 51.32 to a dollar on Oct 5.

However, the rupee has steadily slipped since that peak, as investors resumed their focus on an economy set to grow at its slowest pace in a decade and on little prospects of immediate rate cuts as Reserve Bank of India retains its focus on inflation.

The trade deficit "is negative on the rupee. The uptrend in headline WPI into 8 percent has come into radar now. The rupee will need strong support from the euro to prevent extended weakness beyond 55.10," said Moses Harding, head of asset liability management at IndusInd Bank.

The partially convertible rupee was at 55.07/09 per dollar, after it fell to 55.12, a level last seen Sept 13. It had closed at 54.75/76 on Friday.

The rupee now remains at near the levels when the government raised diesel prices and said it would ease foreign investment rules into the aviation and multi-brand retail sectors, sparking a rally in domestic markets.

Still, it remains well above the record low of 57.32 hit in late June.

Traders warn more losses could be in the store, after the rupee fell past the 100-day moving average, which had acted as major support in recent sessions.

Data on Monday showed the trade deficit widened to $20.9 billion, marking a record, according to a Credit Suisse e-mail to clients sent after the data.

Other reports also proved worrisome for investors, with industrial output unexpectedly contracting 0.4 percent in September, while consumer price inflation remained elevated.

India is due to post October wholesale price index data on Wednesday, with analysts expecting headline inflation to have accelerated 7.96 percent, marking an 11-month high.

High inflation will likely deter the central bank from cutting interest rates this calendar year. The RBI signalled after its policy review on Oct. 30 any easing in monetary policy would not come until the January-March quarter. (Editing by Rafael Nam)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Election 2014

Election 2014

Kashmiris wary as Modi challenges for power.  Full Article 

Facebook's Performance

Facebook's Performance

Facebook Q1 revenue grows 72 percent on rising mobile ads.  Full Article 

Earnings Season

Earnings Season

Bharti Infratel Q4 net profit jumps 64 percent.  Full Article 

Monsoon Forecast

Monsoon Forecast

South Asia monsoon seen below-average to average in 2014 - WMO.  Full Article 

Solar Dispute

Solar Dispute

Green groups urge U.S. to drop solar trade case against India.  Full Article 

Oil Imports

Oil Imports

India to make May-July oil payments to Iran - sources.  Full Article 

Rice Exports

Rice Exports

India may cede top rice exporter spot under Southeast Asian price onslaught.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage